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2 Beyond the Ones We Catch, From an Economic Viewpoint, What is the Scope of the Fraud Problem?

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12/01/09 - 9pmeSlide – P6466 – The Financial Crisis and the Future of the P/C 3 Estimate of Annual Fraud, Assuming 10% of P/C Claim Expense, 2000-2011 The cumulative total of assumed fraud over this 11-year period is $335.4 billion; the average yearly amount was $30.5 billion. Source: Insurance Information Institute calculations and research from ISO/PCI Fast Track data. $ Billions

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12/01/09 - 9pmeSlide – P6466 – The Financial Crisis and the Future of the P/C 4 Average No-Fault (PIP) Claim Severity, 2012* MI, NJ, FL, NY, and MN appear to have severe and growing problems with rampant fraud and abuse in their No-Fault Systems. *Average of the four quarters ending 2012:Q1. Source: ISO/PCI Fast Track data; Insurance Information Institute. The variation in no-fault claim severity is extraordinary. MI is five times higher than MN. NJ is four times higher than PA. NY is four times higher than MA.

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12/01/09 - 9pmeSlide – P6466 – The Financial Crisis and the Future of the P/C 5 Increase in No-Fault Claim Severity: Selected States, 2004-2012* *2012 claim severity figures are for the 4 quarters ending 2012:Q1. Sources: Insurance Information Institute research from ISO/PCI Fast Track data. The no-fault systems in MI, NJ, NY, FL, and MN are under stress due to fraud and abuse, which leads to higher premiums for honest drivers. +58.7% +48.3% +40.7% +46.9% +45.4% In this time span, the price of medical care for the nation as a whole rose 30%

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We Focus on Medical Costs in PIP Because They Dominate PIP Claims* Type of Loss: *data for Minnesota Source: IRC

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Percentage of PIP Claimants Who Have Chiropractic Treatment Note: data are from states with at least 100 PIP claims in the IRC sample. Source: IRC study It likely isn’t just a coincidence that the states with fastest growing PIP claims are the ones with the highest percentage of chiropractic treatments

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Average Number of Visits per Minnesota PIP Claimant Receiving Treatment Source: IRC

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12/01/09 - 9pmeSlide – P6466 – The Financial Crisis and the Future of the P/C 20 New York State No-Fault Auto Claim Severity, 2001:Q1–2004:Q4 Sources: ISO/PCI Fast Track data; Insurance Information Institute. Following Legislation in 2001, From 2002:Q1 to 2004:Q4, NY No-Fault Claim Costs Fell to Roughly Half of What They Were